Released: February 13, 2007

Online banks offer 5%-plus interest

Source: Sandra Block, USA Today

Until recently, investing in a bank savings account was only slightly more profitable than stashing your money in a coffee can. But online banks have brought something revolutionary to the banking industry: competition. In an effort to attract new deposits, they’re offering interest rates of 5% or more, compared with less than 1% for traditional passbook savings accounts. Last month, HSBC Direct announced a 6% promotional rate on new money deposited in an online account. The offer is good through April 30. After that, the rate will revert to HSBC’s regular rate, now 5.05%.

HSBC timed its offer to coincide with tax season, when many people receive refunds, says Stephen Cohen, a spokesman. This is also the time of year when many people “take stock of their financial situation as a whole,” he says.

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